Hedge fund manager and long-time gold bull John Paulson's move to slash ETF bullion holdings by a third in the third quarter does not appear to be a sign that he is abandoning his upbeat view of the metal, industry sources and analysts said.

Paulson & Co. cut its holding in the SPDR Gold Trust to 20.3 million shares from 31.5 million at the end of the second quarter, a U.S. regulatory filing showed late on Monday.

The sale is equivalent to about 1.1 million ounces of gold worth about $1.94 billion based on current prices.

For some time, Paulson has relied on the SPDR trust as a way to hedge his currency exposure.

But he also uses other tools such as forward contracts and swaps, which may not show up in quarterly 13-F filings, so the cut in exposure to the SPDR does not necessarily mean he is turning his back on gold, a person familiar with his thinking said.

Paulson held on to his large bullion investments earlier in the year after billionaire financier George Soros liquidated almost his entire $800 million stake in gold in the first quarter. His holdings have been closely watched since then.

Soros had called gold the ultimate bubble, dumping it before the metal ran up to a record peak of $1,920.30 per ounce on Sept. 6 and then tumbled to a low of $1,534.49 on Sept. 26.

The filing to the U.S. regulators will likely grab headlines and draw out the bullion bears, pointing to this as another sign that gold has had its day, ANZ Research said in a note. (But) we doubt Paulson's gold fever has run its course.

Spot gold was last trading down 0.2 percent on the day at $1,777.85 an ounce by 1602 GMT, having earlier dropped by as much as 1.1 percent. The metal is on track for a 25 percent gain so far this year.

Gold functioned as a safe haven asset earlier in the year as investors bought the metal to guard against global uncertainty including the European debt crisis, but lost some of its lustre following the sharp losses in September and has since been moving largely in tandem with other risky assets.


Paulson has not explained why he decided to sell some of his bullion stake, but analysts said he might be transferring positions from SPDR to other holdings to better shield his positions or cut management fees charged by the SPDR.

Redemptions from ETFs don't always mean the outright liquidation of gold positions: in the past some investors have chosen to move to less-transparent ETFs or other types of gold exposure, UBS analyst Edel Tully said in a note.

Paulson's sales in the SPDR, by far the largest exchange-traded fund backed by gold, have been more than offset by purchases by other investors.

Overall holdings in the SPDR Trust have risen by nearly 3 percent so far in the fourth quarter, following a 2 percent rise in the third quarter.

Paulson's gold liquidation could also be linked to fund redemptions, analysts said. Paulson's Advantage Plus fund lost nearly half of its value by the end of September after sharp falls in some of its equity holdings such as Bank of America , Hewlett Packard and Sino-Forest.

Paulson said earlier this month redemption requests totalled about 8 percent of the firm's total assets, estimated around $30 billion.

Paulson offers his investors a gold fund plus the chance to invest in what he calls a gold share class in his other funds.

Over the year, investors in Paulson's dollar share classes have suffered deeper losses than investors on the gold share classes, which have helped mitigate some of the pain of the equity losses.